The Morrison government gets realistic on the drivers of electricity costs and is told about "The hoax" Australians have been sold on electricity
A comprehensive investigation of the drivers of electricity costs reveals that Greenie costs are not the only driver pushing costs upward. Electricity firms are also making a motza. So PM Morrison takes modest measures to rein in those profits. So the Left praise him for that? Leftists don't like big business.
But, no, Morrison is "hypocritical" for doing that. He said that environmental costs were a big driver of costs so he should stick to that only apparently. He is not allowed to look at more than one cost driver at a time, apparently. He'll get no logic or reason from Leftists, just hate. I suppose in the simplistic Leftist mind, things CAN have only one cause
WHEN the Abbott Government first romped to victory in 2013 on its promise to axe the carbon tax, it was to address one key issue — the rising cost of electricity.
Addressing climate change was costing too much, Australia’s future prime minister Tony Abbott argued, and was impacting people’s power bills.
Five years later and despite dumping the so-called tax, people’s power bills have still skyrocketed but it’s not for the reason they think.
As ABC finance analyst Alan Kohler highlighted in a series of graphs, electricity prices have jumped by 55 per cent since 2007.
The reason? While climate change policies have played a part, they were not the biggest factor and an Australian Competition and Consumer Commission (ACCC) report released in July gave an interesting insight into why prices had risen.
Mainly it’s because of network costs (which added 4 cents per kilowatt hour), the cost of wholesale electricity (2.8 cents), environmental costs (1.6 cents), retail margin (1.4 cents) and retail costs (0.8 cents).
Most of these terms mean nothing to average consumers. To simplify it, the climate change impact can be attributed partly to the lack of a good policy, which means there has not been an “orderly” transition to cleaner energy sources.
Big coal-fired power stations like Northern and Hazelwood have closed without much notice, making it difficult for the market to find alternatives. The closures have also driven up wholesale prices partly because there is less supply and competition. Gas prices also jumped up after the resource started being exported and this has also contributed to higher prices in Australia.
Meanwhile, there’s little incentive for companies to invest in new sources of electricity when the closures mean they can instead charge more for the energy they are already generating.
The ACCC also found “network costs” had driven up prices the most. In particular, in NSW, Queensland and Tasmania, there has been over-investment in networks, the so-called “poles and wires”.
But one of these figures have escaped much of the scrutiny applied to the others: retail margins.
For those not familiar with the jargon — this is the profit that electricity companies make. And this has grown by 1.4 per cent.
As Mr Kohler noted, selling electricity has become so profitable in Australia, retail margins are now the highest in the world.
The government focus has now turned to cracking down on retailers for confusing customers, price gouging and unfair late payment fees.
Yesterday, Prime Minister Scott Morrison announced measures to bring down prices, including that it ask the Australian Energy Regulator to put in place a “price safety net”, which is essentially an electricity price cap, something Australia used to have and then got rid of in 2007.
While the crackdown on retailers is in line with ACCC findings, some have noticed the government’s approach now appears to fly in the face of its previous scaremongering.
The new Morrison Government is trying to break the link between carbon emissions reduction and rising power prices, saying it will “comfortably” meet Australia’s Paris agreement targets while at the same time lowering prices.
It’s something that 7.30 host Leigh Sales questioned Energy Minister Angus Taylor about last night and the lack of response was telling.
“This government suggests that emissions reduction, carbon emissions reduction, and power prices are not linked,” Sales said. “If that is true, then you are admitting that your entire anti-carbon tax platform was a hoax because your opposition to it was based on it driving up power prices?”
One of the first things Mr Morrison did when he took over the prime ministership was get rid of the proposed National Energy Guarantee (NEG), which was aimed at reducing electricity prices, providing more stability in the system but also legislating an emissions reduction of 26 per cent over the next 10 years.
Now it looks like Australia won’t have a climate policy and may have to rely on the government topping up the Emissions Reduction Fund, which Mr Abbott introduced to pay businesses, community organisations, local councils or others to reduce their carbon emissions.
The Morrison Government has also left the door open to support new coal-fired power stations and may even protect these investments against the future climate change action.
Mr Taylor told The Guardian the government would look at absorbing the risks for companies, which had found it hard to get finance because they were unable to predict future carbon action, particularly because Australia has not been able to agree to a bipartisan policy.
Asked whether he acknowledged that would expose taxpayers to risk, Taylor said: “We’ll look at the risks and we’ll seek to minimise the risks to the commonwealth”.